The funds-starved microfinance institutions (MFIs) are now approaching banks afresh for loans in the wake acceptance of the Malegam panel's recommendations by the Reserve Bank of India (RBI).

“We are meeting bankers next week with request to commence/speed up fresh loan disbursals as the RBI has almost given a go-ahead in its credit policy announcement early this week,” Mr Alok Prasad, Chief Executive Officer, Microfinance Finance Intuitions Network (MFIN), told Business Line .

Banks had almost halted fresh disbursals since October 2010 after the AP MFI Act came into force to regulate activities of MFIs.

While banks had commenced restructuring of about Rs 9,000-crore loans through corporate debt recovery packages and at the individual level two months ago, they were hesitant in extending fresh loans.

“Earlier, our feedback was that banks were awaiting RBI's policy based on the Malegam panel's suggestions. From a bank's point of view things, including priority sector status, are clear,” Mr Prasad said.

Dr K. Ramakrishnan, Chief Executive of Indian Banks' Association, said banks were now “not averse” to lending to MFIs.

“But they will still have to prove viability of their business in the present sitaution,” he added.

ADHERENCE

According to Mr Anil Girotra, Executive Director, Andhra Bank, while there is clarity on lending policy to MFIs, the adherence to margin cap and interest cap at 12 per cent and 26 per cent, respectively, would become vital for MFIs.

However, non-AP MFIs were having an ‘advantage' as MFIs with large share of reliance on the AP market still had to face uncertain business conditions, he added.

“The funds-crunch should ease now. Apart from focus on lending rate norms for priority sector status loans, we expect banks to focus on two other norms — lending by not more than two MFIs to a single client and insistence on use of credit bureau,” Mr P. N. Vasudevan, Managing Director, Equitas Microfinance, said.

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